Customers to be offered the best energy tariff

Gas flame

Energy companies will soon have to tell customers about the cheapest deal available to them after the government today backed Ofgem's recommendations on how to clean up the energy sector.

The main proposals, which will come into effect this summer, also include a cap on the number of tariffs providers can offer to make it easier for customers to compare and shop around.

Ofgem, which floated the plans last year, says the reforms will mean a "simpler, clearer and fairer energy market".

Another step taken by the watchdog is to introduce penalty fines if providers are seen to be treating customers unfairly.

Prime Minister David Cameron said the reforms were about "putting people before profits".

"Our aim is that consumers will get the best possible energy tariff - no tricks, no loopholes - and we will use the powers we gained in the Energy Bill earlier this month to make sure this happens," he said.

Secretary of State Edward Davey said the plans will tackle the "bamboozling" number of tariffs customers have to make sense of.

Meanwhile, Alistair Buchanan, chief executive of Ofgem, said the plans were "the most radical shake-up of the energy market since competition began" and would help restore consumer trust in the industry.

Price comparison websites such as uSwitch and energyhelpline welcomed the proposals but said the industry needed to do more to encourage customers to switch if they're not on the best tariff.

Mark Todd, director of energyhelpline, said: "It is a scandal that there are households languishing on dead, over-priced tariffs without knowledge.

"The simplification of tariff structures is a positive move, however, while these steps may be in the right direction, they are too little, too slowly."

He suggested a "nationalised, low-cost energy supplier" would inject competition into the market and a ban on complex pricing structures.